Rics want a 5% annual price rise cap

Where to start on this one? !!!

First off, RICS, and especially their Chief economist, should know better than to mess around with free free market economics.

Second, do the BoE actually have these powers? I don't think they do!

The comment from Sir Howard Davies is the only persons comment in this article that makes any sense at all.

I agree with the sentence "The Housing Market is very mature and almost free to work on the pure economic principles of prices being dictated by supply and demand."

.... but as for the comment "because we are all better off now than before the recession started." well I can assure you I'm definitely not better off, in fact I'm a lot worse off, work that one out !!!
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Reply to the comment left by "Mark Alexander" at "13/09/2013 - 12:48":

As usual this morning I went onto the BBC News website just to catch up with the world only to find the headline “Bank Must limit House Price Booms… The Bank of England should use its powers to limit house price increases to 5% a year…a surveyors group says”.

Clicking through to the article I find that the ‘surveyors group’ is none other than The Royal Institution of chartered Surveyors, of which I am a Fellow.

Frankly, I don’t know what to say. Apparently this idea comes form our chief economist, but surely he can’t be serious?

Here’s the point.

In reality there is no single housing market in the UK, every region, city and town, even suburbs and streets, are different so what does this even mean? Does he mean prices should be capped to a 5% increase on average across the whole of the UK? If so an average plus 5% across the whole UK might mean plus 20% in London, and minus 5% or minus 10% in the north and/or elsewhere. Great for him if he lives in London, but the rest of us pay the price.

Perhaps with a London centric view it’s a case of ‘I’m alright Jack’. Prices in London and the south east might have recovered from the 2007 crash, but many of us are still waiting to catch up, and many are still in negative equity or still have properties worth less than were paid for them.

So does he mean that whilst London enjoys a 5% increase he wishes to condemn the rest of us to more years of negative equity and housing market depression?
If he doesn’t mean an average across the whole UK, and he means 5% for all properties, how can the Bank of England manufacture a 5% increase in Newcastle at the same time as capping London prices to only 5%. There would need to be different loan rates and different lending criteria in each part of the country?
And why 5%? Why not the long term trend rate of around 8%? Or, if he’s worried about house price inflation why not set the figure at 2%, like the Bank of England’s inflation target?

Frankly, it all seems a bit arbitrary.

Then there are moral and ethical questions that come out of this.
Are the RICS now officially abandoning free market economics? I certainly haven’t been consulted about that and given my approval for the trade body that represents me to give that view.

And, if we are to be even handed, is he prepared to suggest that ongoing we ask the Bank of England to cap price falls, or are we only concerned about rises. Same point again – does this mean that officially the RICS are happy to leave most of the population trapped in negative equity and below inflation house price increases whilst he, and his mates, in London, enjoy a steady and predictable 5% return on their property?

If we are going to peg property prices, why don’t we go the whole way and peg the price of gold, or stocks and shares.

To be honest, if anyone wants to peg anything, why not peg the price of oil, gas and electricity, I think most people would find that far more useful.

Let’s be honest, this is either a sound bite gone badly wrong, or he has been horribly misquoted.

Either way the idea is so ill-thought out as to be ludicrous and I am seething that my representative body could come up with such garbage.

Reply to the comment left by "Peter Jones" at "13/09/2013 - 12:54":

Awesome rant, very well said Peter!

Thumbs up to you for that one 🙂

Overall average annual increase since 1995 has been 5.5% according to the Land Registry's price index.
I doubt households' income has increased at the same pace so at one point this will limit the potential for growth in the property market.

To prevent bubbles clearly the BoE has a role to play through lending and rates policy.
But Sir Howard hits the nail on the head when he says that the root cause of increases is the lack of supply.

Reply to the comment left by "Mark Alexander" at "13/09/2013 - 12:48":

"This is a good point as it is clearly the lack of supply that is pushing up house prices especially in the capital rather than increased demand because we are all better off now than before the recession started."

Hi Mark, the above is my comment on what Sir Howard said and I was making the point in reverse that in general we are now all worse off so it must be supply that is the issue not demand.

Reply to the comment left by "Peter Jones" at "13/09/2013 - 12:54":

Hi Peter,

I liken these type of one dimensional arguments being made in this case by Rics to when the opposition party say things are now worse and we would make it better.

Well Yes exactly how?

It is just attention seeking.

Hi All

What a ridiculous suggestion! For a professional body to advocate such intervention into a 'free' market is nonsense. I whole heartedly agree with Peter's comments.

The one thing that could ease the upward price pressure is increased supply. We all know that is not about to happen, and therefore the long term upward price growth is set to continue.

Very well said indeed Peter!

With all this talk of house price booms, people forget that the U.K. has very disparate markets ... and these can niche down to even "street" macro-economics. In one street prices might be rising, but across the city, in another street prices might be dropping.

While RICS want to PREVENT house prices rises of more than 5%, to balance that, they would need to also prevent house prices DROPPING by 5%.

It's an utterly ludicrous suggestion.

Furthermore, if you even it out over 10 years - price rises and price drops ... guess what, it works out at around 5% per annum.

Leave the free market economy to work to the beat of its own drum - no need to meddle!

Joshua Miller if you have not been misquoted you must be off your trolley! I suggest you go directly to some communist country without passing go and keep your crazy ideas to yourself!

Seriously, there is so much investment tied up in UK property, directly and indirectly that any such attempt to control the economics of it all to this extent would cause markets to crash, peoples pension funds to shrink and residential property investors to get out of the market asap to the detriment of thousands of tenants.

I'm sure Neil Patterson can give us many more examples of how property values affect other areas of our economy.

All of the responses to this debate highlight so many reasons why this idea is ill conceived and I'm sure since we first heard of the notion this morning there have been many thousands of other valid points to blow it out of the water. I would like to think that the B of E share at least one of these reasons not to waste any more time on the matter.

Next.....

42 years a Chartered Surveyor and I regret the Institution ( I use the word advisedly) have their heads somewhere rather dark and malodorous. The market WILL do what it wants and if the GBP (Great British Public) are in the mood for a surge it will happen.
I was talking to an agent today a-propos the growth in the number of estate agents story yesterday and his view is that it's the media. Falling prices - bad. Rising prices - bad. So let's make up a story with no credible basis in fact. The market is buoyant and could close down tomorrow so agents are hiring - basis economics. This is effect and NOT cause.

Conclusions? I have none but perhaps it's best to keep heads down and invest in the short term. (2 bed, modern, good transport links).

Nick